SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 27, 1998
CHEMICAL LEAMAN CORPORATION
------------------------------------------------
(Exact name of Registrant as specified in charter)
PENNSYLVANIA 000-8517 23-2021808
(State or Other Jurisdiction Commission (I.R.S. Employer
of Incorporation or file number Identification
Organization) Number)
102 Pickering Way, Exton, PA 19341-0200
(Address of principal executive offices)
(610) 363-4200
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On July 28, 1998, MTL Inc., a Florida corporation ("MTL"), announced that
Palestra Acquisition Corp. ("Palestra"), a Delaware corporation and a
wholly-owned subsidiary of MTL, had entered into an Amendment No. 1 (the
"Amendment") to that certain Agreement and Plan of Merger ("CLC Merger
Agreement"), dated as of June 23, 1998, by and among Palestra, Chemical Leaman
Corporation ("CLC") and the shareholders of CLC (each, a "Shareholder" and,
collectively, the "Shareholders") pursuant to which MTL had agreed, subject to
the satisfaction of certain terms and conditions, to acquire all of the
outstanding shares of common stock, $2.50 par value per share, of CLC ("CLC
Common Stock") through the merger (the "CLC Merger") of Palestra with and into
CLC, which thereby will become a wholly-owned subsidiary of MTL. The
Shareholders have approved the CLC Merger Agreement and the Amendment.
Under the terms of the Amendment, all shares ("Shares") of CLC Common Stock
held by the Shareholders shall, by virtue of the CLC Merger, be converted into
the right to receive an aggregate amount in cash (and MTL Common Stock, as
described below) equal to $72.8 million, less Transaction Expenses (as defined
in the Amendment) in excess of $100,000, plus shares of new preferred stock
having a stated value equal to $5 million (collectively, "Merger
Consideration"), subject to certain setoffs as set forth in the CLC Merger
Agreement. A portion of the Shares held by certain Shareholders who are officers
of CLC shall not be converted into cash, but in lieu thereof, shall be converted
into shares of MTL Common Stock as set forth in their employment agreements. The
Amendment also provides for the modification of certain of the covenants,
conditions and indemnifications provided for in the CLC Merger Agreement.
On July 28, 1998, MTL also announced that MTL had commenced a tender offer
and consent solicitation (the "Offer") for the $100 million principal amount of
outstanding 10 3/8% Senior Notes due 2005 of CLC ("Notes"). The Offer is subject
to the completion of the CLC Merger. The Amendment and a copy of MTL's press
release announcing the offer and the Amendment are attached hereto as Exhibit
2.1 and 99.1, respectively.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
2.1 Amendment No. 1, dated as of July 27, 1998, to the Agreement and
Plan of Merger dated as of June 23, 1998, by and among Palestra
Acquisition Corp., Chemical Leaman Corporation and the
shareholders of Chemical Leaman Corporation.
*99.1 Press Release of MTL Inc., dated July 28, 1998, announcing
commencement of the tender offer for the 10 3/8% Senior Notes due
2005 of CLC (Exhibit 99.1 to the Current Report on Form 8-K of
MTL Inc. dated July 27, 1998 (SEC File No. 0-24180)).
- ----------
* Incorporated by reference.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHEMICAL LEAMAN CORPORATION
Date: August 3, 1998 By: /s/ David M. Boucher
----------------------
David M. Boucher, Senior Vice
President and Chief Financial Officer
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
2.1 Amendment No. 1, dated as of July 27, 1998, to the
Agreement and Plan of Merger dated as of June 23,
1998, by and among Palestra Acquisition Corp.,
Chemical Leaman Corporation and the shareholders of
Chemical Leaman Corporation.
AMENDMENT NO. 1 dated as of July 27, 1998 (this "Amendment") to
the AGREEMENT AND PLAN OF MERGER (the "Original Agreement" and, as
amended, this "Agreement") dated as of June 23, 1998, by and among
PALESTRA ACQUISITION CORP., a Delaware corporation ("Purchaser"),
CHEMICAL LEAMAN CORPORATION, a Pennsylvania corporation (the
"Company"), and THE SHAREHOLDERS OF THE COMPANY NAMED ON SCHEDULE I
ATTACHED TO THE ORIGINAL AGREEMENT (each, a "Shareholder", and
collectively, the "Shareholders"). Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the
Original Agreement.
WHEREAS, the Board of Directors of the Company has adopted resolutions
approving this Amendment and the transactions to which the Company is a party
contemplated hereby, and has agreed, upon the terms and subject to the
conditions set forth herein, to recommend that the Company's shareholders
approve this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual benefits to
be derived from this Amendment and the representations, warranties, covenants,
agreements and conditions hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
AMENDMENTS
1.1 Purchase Price; Effect on Capital Stock.
(a) Annex I to the Original Agreement is hereby amended by deleting the
definition of "Merger Consideration" and replacing it with the following:
""Merger Consideration" means the sum of (i) the Aggregate Cash
Merger Consideration plus (ii) shares of New Preferred Stock having a
stated value equal to $5 million."
(b) Annex I to the Original Agreement is hereby amended by adding the
following thereto:
""Aggregate Cash Merger Consideration" means $72,800,000.
<PAGE>
(c) Annex I to the Original Agreement is hereby amended by adding the
following thereto:
"New Preferred Stock" means shares of the Preferred Stock of MTL,
the designations, rights and preferences of which are more
particularly described on Exhibit 2.1(b) hereto.
(d) Section 2.1(a) of the Original Agreement is hereby amended by adding
the following new sentence to the end thereof:
"Notwithstanding anything to the contrary contained in this
Agreement or in any Employment Agreement, the Purchaser shall be
obligated to pay in cash to the Shareholders an amount equal to but
not more than (i) the Aggregate Cash Merger Consideration, less (ii)
the product of (A) the aggregate number of Merger Shares that are to
be converted into MTL Stock pursuant to Section 2.1(c) and the
applicable Employment Agreements multiplied by (B) a fraction, the
numerator of which shall be the Merger Consideration less the Net
Transaction Expenses, and the denominator of which shall be the Merger
Share Number (the "MTL Stock Amount"), less (iii) the Net Transaction
Expenses."
(e) Sections 2.1(b)(iii), (iv) and (v) of the Original Agreement are each
hereby deleted in their entirety and shall be collectively replaced with the
following:
"(iii) the Merger Shares held by each Shareholder (other than the
Merger Shares that are to be converted into shares of MTL Stock)
shall, by virtue of the Merger and without any action on the part of
any Shareholder, cease to be outstanding and be converted into the
right to receive, subject to the terms and conditions of this
Agreement, (A) shares of New Preferred Stock having a stated value
equal to the product of such Shareholder's Common Equity Percentage
multiplied by $5 million and (B) cash in an amount equal to such
Shareholder's Cash Merger Consideration.
For purposes of the foregoing, "Cash Merger Consideration" means the
following:
(i) in respect of each Shareholder other than David R. Hamilton
and David M. Boucher, an amount equal to (A) the product of such
Shareholder's Common Equity Percentage multiplied by the Aggregate
Cash Merger Consideration, less (B) the product of the Hamilton
Special Merger Consideration multiplied by such Shareholder's Post
Hamilton Percentage, less (C) the product of the Boucher Special
Merger Consideration multiplied by such Shareholder's Post Boucher
Percentage, less (D) the product of such Shareholder's Percentage of
Merger Consideration multiplied by the Net Transaction Expenses;
(ii) in respect of David R. Hamilton, an amount equal to (A) the
product of Mr. Hamilton's Common Equity Percentage multiplied by the
Aggregate Cash Merger Consideration, plus (B) the Hamilton Special
Merger Consideration, less (C) the product of the Boucher Special
Merger Consideration multiplied by Mr. Hamilton's Post Boucher
Percentage, less (D) the product of
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Mr. Hamilton's Percentage of Merger Consideration multiplied by the
Net Transaction Expenses; and
(iii) in respect of David M. Boucher, an amount equal to (A) the
product of Mr. Boucher's Common Equity Percentage multiplied by the
Aggregate Cash Merger Consideration, plus (B) Boucher Special Merger
Consideration, less (C) the product of the Hamilton Special Merger
Consideration multiplied by Mr. Boucher's Post Hamilton Percentage,
less (D) the product of Mr. Boucher's Percentage of Merger
Consideration multiplied by the Net Transaction Expenses.
For purposes of the foregoing, the "Post Boucher Percentage" means in
respect of any Shareholder, the total number of Merger Shares held by such
Shareholder divided by the total number of Merger Shares held by all
Shareholders other than Mr. Boucher."
For purposes of the foregoing, the "Post Hamilton Percentage" means in
respect of any Shareholder, the total number of Merger Shares held by such
Shareholder divided by the total number of Merger Shares held by all
Shareholders other than Mr. Hamilton."
1.2 Delivery of Funds and Certificates; Surrender of Certificates.
(a) Section 2.2(a) of the Original Agreement is hereby amended by deleting
the words the "the funds necessary to pay the Merger Consideration (taking into
account the MTL Stock and subject to any setoffs as set forth in Section 7.3(g)
or Section 7.3(h))" contained therein and replacing such words with the words
"the funds necessary to pay the Aggregate Cash Merger Consideration, less the
Net Transaction Expenses, less the MTL Stock Amount and less the aggregate
amount of all setoffs pursuant to Section 7.3(g) and Section 7.3(h))."
(b) Section 2.2(b) of the Original Agreement is hereby deleted in its
entirety and replaced with the following:
"Each holder of an outstanding certificate or certificates which prior
thereto represented Merger Shares, upon surrender at, or as soon as
practicable after, the Effective Time of the Merger (as the case may be) to
the Transfer Agent of such certificate or certificates (together with a
letter of transmittal signed by such holder in substantially the form of
Exhibit A attached hereto), shall be entitled to the Cash Merger
Consideration (subject to any setoffs as set forth in Section 7.3(g) or
Section 7.3(h)) and the shares of New Preferred Stock into which such
Merger Shares previously represented by such certificate or certificates
surrendered shall have been converted pursuant to this Agreement. The
Transfer Agent shall accept such certificates and such letter of
transmittal upon compliance with such reasonable terms and conditions as
the Transfer Agent may impose to effect an orderly exchange thereof in
accordance with normal practices. After the Effective Time of the Merger,
there shall be no further transfer on the records of the Company or its
transfer agent of certificates representing Merger Shares which have been
converted, in whole or in part, pursuant to this Agreement, into the right
to receive cash, MTL Stock or New
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Preferred Stock, and if such certificates are presented to the Company for
transfer, they shall be canceled against delivery of such consideration. If
cash or a certificate representing shares of MTL Stock or New Preferred
Stock is to be remitted to a name other than that in which the certificate
for Merger Shares surrendered for exchange is registered, it shall be a
condition of such exchange that the certificate so surrendered shall be
properly endorsed, with signature guaranteed or otherwise in proper form
for transfer. Until surrendered as contemplated by this Section 2.2(b),
each certificate for Merger Shares shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive,
subject to any setoffs pursuant to Section 7.3(g) or Section 7.3(h), for
each Merger Share represented thereby upon such surrender, cash, shares of
New Preferred Stock and/or shares of MTL Stock, in the amount determined
pursuant to Section 2.1(b) or the applicable Employment Agreement, as the
case may be."
(c) Section 2.2(d) of the Original Agreement is hereby deleted in its
entirety and replaced with the following:
"(d) All consideration (whether in the form of cash, New Preferred
Stock, MTL Stock or setoff pursuant to Section 7.3(g) or Section 7.3(h))
paid upon surrender of certificates representing Shares in accordance with
the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares so exchanged that were
previously represented by such certificates."
1.3 Setoffs.
Sections 7.3(g) and (h) of the Original Agreement are each hereby amended
by deleting the words "any Merger Consideration or other payments" in each such
Section and replacing it in each such Section with the words "Cash Merger
Consideration or other cash payments."
1.4 Conditions.
Section 7.3(p) of the Original Agreement is hereby amended by deleting
"$4,000,000; provided that, in the Shareholder Representative's sole discretion,
such amount may be increased, at any time prior to two days after Purchaser
delivers a notice that it intends to terminate this Agreement pursuant to
Section 9.1 based upon the condition set forth in this Section 7.3(p) not being
satisfied, to an amount not to exceed $5,000,000 (such excess amount over
$4,000,000, the "Indemnity Cap Adjustment Amount"); it being understood that if
such amount exceeds $5,000,000, Purchaser shall be under no obligation to effect
the Merger" and replacing it with "$6,500,000."
1.5 Indemnification.
(a) Section 8.6(b) of the Original Agreement is hereby deleted in its
entirety and replaced with the following:
"(b) Indemnity Limitations for the Shareholders. Except as provided
herein, the sum of all Losses pursuant to which indemnification is payable
by the
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<PAGE>
Shareholders in the aggregate pursuant to Section 8.1(a)(i) and Section
8.1(a)(iv) shall not exceed the sum of (i) $8,250,000 (the "Cap"), plus
(ii) an amount equal to the Indemnity Cap Adjustment Amount (as adjusted,
the "Adjusted Cap"), and no Shareholder shall be liable to Purchaser for
any amount in excess of the sum of (x) the Cash Merger Consideration
received by such Shareholder (which shall include for these purposes shares
of MTL Stock), plus (y) the stated value of all shares of New Preferred
Stock received by such Shareholder in connection with the consummation of
the Merger (which shall not include, for purposes hereof, shares issued as
a payment-in-kind dividend); provided, however, that in no event shall the
limitations set forth in this Section 8.6(b) apply with respect to the
representations and warranties set forth in the Subject R&W or any claim
arising as a result of fraud. Notwithstanding anything else provided herein
or in the Original Agreement, any payment to Purchaser in respect of
Purchaser Losses, whether by setoff against the Qualified Letters of
Credit, cash payments, setoff against the New Preferred Stock, or setoff or
reduction made in respect of the stated value of the New Preferred Stock or
any dividends thereunder or otherwise, shall be included in any calculation
of amounts paid by the Shareholders for the purpose of determining, and
shall be credited against, the Cap, the Adjusted Cap and the L/C Cap, and
the amount of the Qualified Letters of Credit shall be reduced to account
for such credit."
(b) Section 8.7 of the Original Agreement is hereby amended by (i) deleting
the words "Adjusted Cap" each time it appears therein and replacing it with the
words "L/C Cap" and (ii) adding a new sentence to the end thereof which shall
read as follows:
"Notwithstanding anything to the contrary contained herein, Purchaser
agrees not to draw on any Qualified Letter of Credit (i) prior to the
twenty-fourth month immediately following the Closing Date, unless at such
time all dividends on the shares of the New Preferred Stock have either (i)
been paid in cash or (ii) paid as a payment-in-kind dividend )("PIK
Shares"), the stated value of which has been reduced to zero, and (iii)
after the twenty fourth month immediately following the Closing Date, until
such time as the stated value of the outstanding PIK Shares has been
reduced to zero and the stated value of the outstanding shares of New
Preferred Stock that are issued at the Effective Time in connection with
the Merger has been reduced to $2.5 million."
(c) Annex I to the Original Agreement is hereby amended by deleting the
definition of "Indemnity Cap Adjustment Amount" and replacing it with the
following:
""Indemnity Cap Adjustment Amount" means an amount, not to exceed $2.5
million, equal to the excess of (i) (a) the sum of any EHS Damages which in
the written opinion of Purchaser's consultant (which shall be one or more
of the consultants listed on Schedule 7.3(p)(1)) are reasonably expected to
be required to be incurred pursuant to EHS Requirements of Law due to
conditions other than those identified on Schedule 7.3(p)(2) discovered by
the Purchaser after the date hereof and prior to the Closing in the course
of Purchaser's due diligence or due to any new Proceeding or Order or any
new claim or amended claim arising in connection with any existing
Proceeding, Order or condition, plus (b) the reasonably expected costs
based on the Purchaser's
5
<PAGE>
consultant's evaluation in writing, for full compliance and remediation
required pursuant to any EHS Requirement of Law (including pursuant to ISRA
and the Connecticut Transfer Act) resulting from the announcement or
consummation of the transactions contemplated by this Agreement over (ii)
$4,000,000.
(d) Annex I to the Original Agreement is hereby further amended by adding
the following thereto:
""L/C Cap" means, at any time, (i) the Cap, plus (ii) the Indemnity
Cap Adjustment Amount, less (iii) the aggregate Preferred Stock Adjustment
Amount in effect at such time.
"Preferred Stock Adjustment Amount" means the sum of (i) the stated
value of all outstanding PIK Shares that are issued or are required to be
issued pursuant to the terms of the New Preferred Stock as a
payment-in-kind dividend on shares of New Preferred Stock that are issued
at the Effective Time in connection with the Merger ("Initial PIK Shares"),
plus (ii) after the end of the twenty-fourth month immediately following
the Closing Date, if all shares of New Preferred Stock including all PIK
Shares have not been redeemed, $2.5 million, plus (iii) at Purchaser's
option (exercised by delivery of an irrevocable notice to the Shareholders
Representative), additional shares of New Preferred Stock that are issued
at the Effective Time in connection with the Merger having a stated value
equal to up to $2.5 million.
1.6 Financing.
Exhibit E is hereby deleted in its entirety and replaced with Exhibit E
hereto.
1.7 Notes.
(a) Purchaser covenants and agrees to use its commercially reasonable best
efforts to cause MTL Inc. to commence an offer to purchase up to all of the
outstanding Notes within five business days after the date hereof and to
complete such offer substantially in accordance with the terms and subject to
the conditions described in the draft of such offer to purchase which has been
previously provided to the Company. It is understood that any delay in
commencing such offer to purchase in connection with either (i) any act or
failure to act by the Company or any third party or (ii) Purchaser's compliance
with applicable law shall not constitute a breach of this Agreement.
(b) The Company agrees to use its commercially reasonable best efforts
(without incurring any costs) to cooperate with the Purchaser and the holders of
its Notes in connection with the offer to purchase set forth in Section 1.7(a).
(c) Annex I to the Original Agreement is hereby amended by deleting the
definition of "Transaction Expenses" contained therein and replacing it with the
following:
"Transaction Expenses" means all fees and expenses that are incurred
by or on behalf of the Company or any Shareholder (whether incurred prior
to, at or after the Closing) in connection with the preparation for, and
consummation of,
6
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the transactions contemplated hereby, by the other agreements referred to
herein or otherwise in connection with a sale of the Company, including any
payments to terminate or purchase options to purchase equity interests of
any Subsidiary (including payments to Robert Johnson and William Kannehan)
(it being understood that Transaction Expenses shall not include either (a)
the $4,000,000 cost to obtain the requisite consent of the holders of Notes
to an amendment to the terms of the Indenture, or the fees and expenses
incurred by the Company in connection with such solicitation of consents
all as set forth in Section 6.12 or (b) any costs incurred by the
Purchaser, MTL Inc. or Apollo Management, L.P., in connection with any
offer to purchase the Notes commenced by MTL Inc.).
(d) Sections 6.12 and 7.3(m) of the Original Agreement are hereby deleted
in their entirety.
1.8 Closing.
Each party hereto agrees to use its commercially reasonable efforts to
consummate the Merger on or prior to August 31, 1998.
ARTICLE II
MISCELLANEOUS PROVISIONS
2.1 Agreement.
Except as modified by this Amendment, the Original Agreement shall remain
in full force and effect, enforceable in accordance with its terms.
2.2 Counterparts.
This Amendment may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
2.3 Governing Law.
THIS AMENDMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK, OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAW OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF
THIS AMENDMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF
LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AMENDMENT OR ANY
RELATED DOCUMENT MAY BE BROUGHT EXCLUSIVELY IN
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THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS AMENDMENT, EACH
PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF OR HIMSELF AND IN RESPECT OF
ITS OR HIS PROPERTY AND ASSETS, GENERALLY AND UNCONDITIONALLY THE JURISDICTION
OF THE AFORESAID COURTS.
* * *
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
The Purchaser:
PALESTRA ACQUISITION CORP.
By: /s/ Joshua J. Harris
-------------------------------
Name: Joshua J. Harris
Title: President
The Company:
CHEMICAL LEAMAN CORPORATION
By: /s/ David M. Boucher
-------------------------------
Name: David M. Boucher
Title: Senior Vice President
and Chief Financial
Officer
<PAGE>
DAVID R. HAMILTON
CATHARINE C. HAMILTON
CATHARINE ELIZABETH HAMILTON
TENNESSEE ALEXIS HAMILTON
HAMILTON FAMILY TRUST
SAMUEL C. HAMILTON
GEORGE MCFADDEN
JOHN H. MCFADDEN
TRUSTEES U/W/O ALEXANDER B.
MCFADDEN, DECEASED, F/B/O JOHN,
MARY AND GEORGE MCFADDEN
TRUSTEES U/W/O GEORGE MCFADDEN,
DECEASED, F/B/O GEORGE MCFADDEN
TRUSTEES U/W/O GEORGE MCFADDEN
DECEASED, F/B/O JOHN H. MCFADDEN
TRUSTEES U/W/O GEORGE MCFADDEN,
DECEASED, F/B/O MARY JOSEPHINE
MCFADDEN
LESLEY TAYLOR
TRUSTEES F/B/O ELIZABETH CUTTING
MCFADDEN
EUGENE C. PARKERSON
DAVID M. BOUCHER
PHILIP J. RINGO
REUBEN M. ROSENTHAL
JACK H. ELROD
J. STEPHEN HAMILTON
LEON F. PALMER
DENNIS R. COPELAND
F.C. COLON-OSORIO
G. MICHAEL CRONK
KAREN SZABO LLOYD
FRANK LLOYD
By: /s/ David R. Hamilton
-------------------------------
David R. Hamilton
Attorney-in-Fact
<PAGE>
DAVID R. HAMILTON
CATHARINE C. HAMILTON
CATHARINE ELIZABETH HAMILTON
TENNESSEE ALEXIS HAMILTON
HAMILTON FAMILY TRUST
SAMUEL C. HAMILTON
GEORGE MCFADDEN
JOHN H. MCFADDEN
TRUSTEES U/W/O ALEXANDER B.
MCFADDEN, DECEASED, F/B/O JOHN,
MARY AND GEORGE MCFADDEN
TRUSTEES U/W/O GEORGE MCFADDEN,
DECEASED, F/B/O GEORGE MCFADDEN
TRUSTEES U/W/O GEORGE MCFADDEN
DECEASED, F/B/O JOHN H. MCFADDEN
TRUSTEES U/W/O GEORGE MCFADDEN,
DECEASED, F/B/O MARY JOSEPHINE
MCFADDEN
LESLEY TAYLOR
TRUSTEES F/B/O ELIZABETH CUTTING
MCFADDEN
EUGENE C. PARKERSON
DAVID M. BOUCHER
PHILIP J. RINGO
REUBEN M. ROSENTHAL
JACK H. ELROD
J. STEPHEN HAMILTON
LEON F. PALMER
DENNIS R. COPELAND
F.C. COLON-OSORIO
G. MICHAEL CRONK
KAREN SZABO LLOYD
FRANK LLOYD
By: /s/ George McFadden
-------------------------------
George McFadden
Attorney-in-Fact
<PAGE>
<TABLE>
<CAPTION>
Exhibit 2.1(b)
Terms of New Preferred Stock
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Issuer MTL Inc.
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<S> <C>
Stated Value $5,000,000. The stated value of the outstanding shares of New Preferred Stock
(including Initial PIK Shares but excluding all other PIK Shares) will be reduced by
$1 for each $1 of Purchaser Losses; provided that the aggregate amount of such
reduction will not exceed the sum of (i) $2.5 million, plus (ii) the stated value of
all Initial PIK Shares. The stated value will be further reduced by the stated
value of all shares of New Preferred Stock that reduce the L/C Cap pursuant to
clause (iii) of the definition of Preferred Stock Adjustment Amount. Any setoff
against Purchaser Losses set forth above will reduce the L/C Cap.
Any setoff or reduction of PIK Shares issued will result in an immediate, automatic
and irrevocable loss of any PIK Shares issued as a dividend on such setoff or
reduced stock. The parties agree that the Shareholders shall receive no credit for
such loss because the intention is that the Shareholders would not have been
entitled to receive such shares in any event. To effectuate the foregoing, the
parties further agree that, at any time, the stated value of all PIK Shares other
than Initial PIK Shares will equal (i) the aggregate stated value of all such PIK
Shares multiplied by (ii) a fraction, the numerator of which is the aggregate amount
following any such reduction of the stated value of the Initial PIK Shares pursuant
to the preceding paragraph and the denominator of which is the aggregate stated
value of all Initial PIK Shares (without giving effect to any reductions to the
stated value thereof).
- -----------------------------------------------------------------------------------------------------------------------------
Dividends 8% per annum, payable annually in arrears and payable in kind at Issuer's option for
three years from issuance date. Dividends will be payable on the stated value on the
applicable payment date of all outstanding shares of New Preferred Stock (including
all shares issued at the Effective Time in connection with the Merger and all PIK
Shares previously issued).
Dividends on shares of common stock will not be paid unless all accrued dividends on
New Preferred Stock have been paid.
- -----------------------------------------------------------------------------------------------------------------------------
Maturity Ninth anniversary from the Closing Date.
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Optional Redemption Redeemable any time at Issuer's option at the following prices (plus
accrued and unpaid dividends):
Premium to
Date Stated Value
---- ------------
Closing Date to 42nd Month 100%
Beg. of 43rd month to end of 54th month 105%
Beg. of 55th month to end of 66th month 110%
Beg. of 67th month to end of 78th month 115%
Thereafter 120%
- -----------------------------------------------------------------------------------------------------------------------------
Change of Control Upon sale of Issuer to a non-affiliated third party or other change of
control to a non-affiliated third party, shares of New Preferred Stock would be
mandatorily redeemable for the redemption value set forth above.
- -----------------------------------------------------------------------------------------------------------------------------
IPO Up to 50% of net proceeds of primary offering to be used to redeem shares of New
Preferred Stock for the redemption value set forth above.
- -----------------------------------------------------------------------------------------------------------------------------
Liquidation Preference Upon liquidation, shares of New Preferred Stock would be senior to common
stock and would be entitled to receive the redemption value set forth above.
- -----------------------------------------------------------------------------------------------------------------------------
Exchangeability Shares of New Preferred Stock can be exchanged at the Issuer's option for Junior
Subordinated Debt of the Issuer, which shall be subject to the same rights of offset
and adjustment. The Junior Subordinated Debt will contain substantially similar terms
and conditions as the terms and conditions of the New Preferred Stock, including
terms and conditions relating to dividends, maturity, optional redemption, change of
control, IPO, liquidation preference and voting rights.
- -----------------------------------------------------------------------------------------------------------------------------
Voting Rights Holders of shares of New Preferred Stock will be entitled to a separate class vote
for any amendment to the Certificate of Designations in respect of the New Preferred
Stock to the extent that such amendment adversely affects the holders of the New
Preferred Stock.
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</TABLE>
